2017 reflects an important milestone for the Chinese digital landscape. We have seen the market develop extraordinarily quickly over the past five years with the growth and dominance of several key players, notably Alibaba, Tencent’s WeChat and Baidu. These are, respectively, the largest e-commerce company, social network and search engine in China.
Whilst blogging about the digital sphere in China over the last few years one has witnessed the rise of these dominant Chinese players and had the pleasure of seeing a mind-boggling level of development and innovation occur, this has traditionally been pioneered by the big players. Alibaba developed world leading cross border e-retail platforms and the largest delivery network on the planet. WeChat grew to over 750 million active user accounts and built the most integrated social media platform in the world with a vast array of services. And Baidu have continually pushed boundaries in augmented and virtual reality.
Now, as we move into 2017, I see this scale of innovation and development no longer confined to the big names. Rather, fragmentation and diversification is occurring with smaller platforms and APPs pushing the envelope, innovating and galvanizing support and followers to a far greater degree when compared to a year ago.
This process is to be expected, as the market matures the established digital platforms have entrenched themselves (and will remain popular), the roadmap for netziens has been established whilst the services offered by the key players is of such a quality that continued success and innovation is undeniable.
However, we are also seeing the growth of smaller digital companies that will make their mark, in some cases their growth is even being facilitated by the opportunities and infrastructure for growth offered by the heavyweights.
Overall we expect to see a more diverse market place that will continually innovate to satisfy the increasingly tech-savy online user in China.
Let’s dive into the key market trends as we enter the Year of the Rooster.
1) The great mobile biking APP race.
The two largest players here are MOBIKE and OFO, notably both new APPs to the market. This is the well documented phenomenon of ‘mobile biking’ where users scan a QR code on the bike to use it and then can leave the bike wherever they like when finished, they scan to finish the ride and payment is made via the APP. There are no fixed bicycle stations necessary. ‘OFO’ was developed by a student from Beijing University and is now backed by Didi, the largest taxi hailing APP in China whilst ‘MoBike’ was created by a forum Chinese Uber Executive and is backed by WeChat.
The initial investment into these biking schemes has been astronomical and it will be interesting to see how they develop in the fiercely competitive Chinese market. Innovative start-ups such as these do reflect the states success in supporting new digital and entrepreneurial projects as they aim to shift towards a tertiary, service based economy.
2) The uptake of Augmented Reality
Baidu’s research in AR is expected to further increase, a whole laboratory has been set up to develop AR based products which combine the physical and the virtual spheres in an interactive way for consumers. For example; digital advertising can now be over-layed onto the physical world via a simple smartphone camera.
Marketers are looking to capitalize on the huge popularity of ‘Pokemon Go’ in China. The most popular and high profile example in China is Alipays new AR Hongbao APP which is akin to Pokemon Go but users interact with ‘hongbaos’, that is ‘red envelopes’ with funds inside that (when collected) transfer the contents to a users Alipay account. This is a 21st century adaption of the traditional envelope given with money inside as a gift on special holidays and occasions in China.
There are opportunities to physically drive footfall and traffic through ‘hongbaos’ placed at certain locations on GPS mapping services. It links online to offline in a whole new way. With Chinese consumers fond of unique content it can be a way to incentivise users to engage with brands online and on social media.
Baidu’s developments in AR also present opportunities for smaller platforms who can utilize such technological developments and grow their apps in conjunction with business partnerships.
3) China becomes more connected online
China currently has an internet penetration rate of 55% which is estimated to rise to 65% by the end of 2017. This 10% increase equates to a further 150 million netziens online, largely from the smaller third tier cities in more rural China, towards the west of the country. This is partly due to the growth of e-commerce services and delivery routes, there is a stronger incentive to shop online across the nation (especially in area’s not connected to a large quantity of retail outlets). It is also a case of further modernization with the expansion of WIFI hotspots, faster connectivity and rising incomes.. it’s a testament to the popularity of the internet in China.
4) Smaller APPs enter the ring
This will be the year for smaller applications offering different and more personalized services than the behemoth that is WeChat.
‘Little Red Book’ are the fastest growing e-commerce app in China, it focused on overseas travel and shopping guides as well as constructing personalized ‘shopping itineraries’ for users based on their online behaviour and engagement with the app, it therefore rewards regular users with a more personalized service than WeChat currently offers.
‘On demand’ style applications such as ‘O2O’ (dealing with local information, food delivery and entertainment bookings) and the whole host of food delivery services including ‘Sherpas’ and ‘XiaoFang’ will continue to be popular but incredibly competitive, it is hard for one such player to pull ahead with so many competitors in the high speed, product delivery game. ‘On Demand’ style applications tap into the modern Chinese psyche with consumers desiring instant gratification online and will be going nowhere in China in 2017.
The app WoYuoFan, which means ‘I have rice’ was founded by a graduate from Yale who worked in VC and was known to run a successful account on Weibo about restaurants in NYC before embarking on staking his claim in the social eating market in China. He developed an app for shared meals with other users, you could connect and meet in a restaurant searchable via categories of personality and food-type. He said that going to meals for Chinese is just like going to parties for Americans. The Chinese live to eat and an app helping to facilitate this and friendships based on searchable categories has been a hit! The APP last summer was setting up over 60 shared meals per day. This trend of more ‘offbeat’, social based apps is here to stay as users look for different experiences outside the traditional social networking formula.
5) Cross-border e-commerce
Cross border shows no signs of slowing down, the Chinese have proved they have an insatiable appetite for western products and services, Alibaba’s ‘Tmall Global’ lead the charge but JD are also growing their international section with a greater focus on technology and appliances. They have been carving a strong niche which sets them apart from Alibaba as a more viable contender. Alibaba, just the other week signed an agreement with the US to provide 10,000 jobs as they further expand their international commerce efforts.
It’s worth noting that Alibaba have really made steps to crack down on counterfeits, last year alone they banned thousands of illegal sellers on their Taobao platform and shut
down hundreds of counterfeit stores. The infrastructure provided for the sale of international products in China is now more developed than ever, this includes logistics, storage, delivery and presentation of products and services. It is not just Alibaba though.. smaller commerce apps such as ‘Little Red Book’ are on the rise.
Overall I have a tried to paint a picture of a more diverse and competitive digital market in China in 2017 that will still enjoy the presence of the big three (BAT), Baidu, Alibaba and Tencent.. but will benefit from the innovation of new apps, we are already seeing this with Mobike, Ofo and Little Red Book going from strength to strength.
Watch this space. Digital in China moves fast and it’s always interesting to be in the middle of it! We are a wholly digitally focused agency specializing in growth online in the Chinese market.. For more information or if you have any questions drop us a message!